Exclusive: ANZ's sale of insurance unit attracts Meiji Yasuda, AIA Group - sources

SYDNEY/SINGAPORE/TOKYO (Reuters) - Australia and New Zealand Banking Group's ANZ.AX sale of its life insurance and wealth business, which has been valued at $3.33 billion by the bank, is attracting interest from Japan’s Meiji Yasuda and Hong Kong-based AIA Group 1299.HK, according to people familiar with the situation.

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Meiji Yasuda, Japan’s third-largest private sector insurer by assets, is attracted to ANZ’s wealth business as well as its life insurance arm, a source close to the unlisted Tokyo-based company said. The wealth division’s relatively low-risk, fee-based superannuation business is appealing, the source said.

AIA could scale up its existing Australian business significantly if it buys the ANZ business, said two people familiar with AIA’s interest. AIA’s current Australian premium income is small relative to its other markets, such as Hong Kong, Singapore and Thailand.

Representatives of Meiji Yasuda and AIA declined to comment.

The ANZ assets have an embedded value of A$4.5 billion ($3.33 billion), according to ANZ’s recent results. Chief Executive Shayne Elliott this month indicated the bank was seeking a price at least that high. Australia is an attractive market for foreign insurers because the population and economy are growing faster than in most other developed markets and the regulatory regime is more stable than in emerging markets, analysts said.

Japan’s Dai-ichi Life Holdings 8750.T, which is Australia's largest life insurer after acquiring Tower Australia (now called TAL) for A$1.2 billion in 2011, is not interested in bidding, according to one person close to the company.

The ANZ business, called OnePath, has a 10 percent share of the life insurance market, making it the sixth-biggest player In Australia. The top life insurers in Australia are TAL with 17 percent and AIA with 13 percent, according to an investor presentation from TAL in September, in which it cited data from consultancy NMG Group.

ANZ’s Australian insurance and wealth business reported a full-year cash profit of A$327 million for the year ended Sept. 30, down 24 per cent from a year earlier, though the result was after significant restructuring and software charges.

This is the second major move by a major Australian bank to offload its insurance business. National Australia Bank NAB.AX sold its 80 percent stake in its life insurance arm to Japan's Nippon Life [NPNLI.UL] for A$2.4 billion ($1.84 billion) in a deal that closed last month.

The big Australian banks are exiting the sector because the return on equity of around 10 percent is lower than overall bank returns and regulators have required them to hold more capital against their higher-returning mortgage books, analysts said.

“The landscape is changing,” Sydney-based PwC partner Scott Fergusson said. “Organisations are going to focus on their strengths. The divestment is about (banks) choosing to no longer be the manufacturer (of life insurance). It recognizes they still want to sell life insurance to their customers but the underwriter will be someone else.”

NAB split its life insurance arm from its wealth business as part of its sales process, retaining the latter. But ANZ’s Elliott this month indicated the bank will seek to sell the insurance and wealth businesses together if possible, due in part to the costs involved in splitting the business.

Other companies who could also take a look at the ANZ assets include U.S.-based Metlife MET.N and Switzerland’s Zurich Insurance Group ZURN.S, which are existing players in the Australian market but lack scale, said three people aware of the process. U.S.-based Prudential FinancialPRU.N, which is already present in Asian markets like Japan, China and South Korea, could consider using the ANZ asset as an entry-point into Australia, these people added.

The sources declined to be identified because the details of the deal process are not public.

Representatives of Prudential, Metlife and Zurich declined to comment.

Reporting by Saeed Azhar, Taiga Uranaka and Jamie Freed; additional reporting by Sumeet Chatterjee in HONG KONG; Editing by Martin Howell